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Exam 15: S Corporations

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Question 21

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Several individuals acquire assets on behalf of Skip Corporation on May 28, purchased assets on June 3 and began business on June 11.They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21.The S election must be filed no later than 2 1/2 months after:

A) May 28.
B) June 3.
C) June 11.
D) June 21.
E) December 31.

F) A) and D)
G) B) and E)

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Question 22

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An S corporation is subject to the following tax(es) .

A) Corporate income tax (§ 11) .
B) Built-in gains tax.
C) Alternative minimum tax.
D) None of the above apply to S corporations.

E) B) and C)
F) A) and D)

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Question 23

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Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

The carryover period for the NOLs of a C corporation does not continue to run during S corporation years.

Amit, Inc., an S corporation, holds an AAA balance of $614,000 at the beginning of the tax year.During the year, the following items occur. $\begin{array}{lr}\text { Operating income } & \$ 501,000 \\\text { Interest income } & 6,500 \\\text { Dividend income } & 13,020 \\\text { Municipal bond interest income } & 6,000 \\\text { Long-term capital loss from sale of investment land } & 7,400 \\\text { Section } 179 \text { depreciation deduction } & 6,000 \\\text { Charitable contributions } & 19,000 \\\text { Cash distributions } & 57,000\end{array}$ ? Amit's ending AAA balance is:

Oxen Corporation incurs the following transactions. $\begin{array} { l r } \text { Net income from operations } & \$ 100,000 \\\text { Interest income from savings account } & 3,000 \\\text { Long-term capital gain from sale of securities } & 10,000 \\\text { Short-term capital loss from sale of securities } & 4,000\end{array}$ ? Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan.As a result, Megan must recognize:

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

Persons who were S shareholders during any part of the year before the election date, but were not shareholders when the election was made, also must consent to an S election.

An S corporation shareholder's stock basis includes his or her direct investments plus a ratable share of any corporate liabilities.

What statement is correct with respect to an S corporation?

An S corporation cannot incur a tax liability at the corporation level.

​Which statement is incorrect with respect to filing for an S election?

​Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

During the year, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000.At the end of last year, his stock basis was $4,000.The corporation earned $11,000 ordinary income during the year.It has no accumulated E & P.Which statement is correct?

Non-separately computed loss ____________________ a S shareholder's stock basis.

?Lemon Corporation incurs the following transactions. ? $\begin{array} { l r } \text { Net income from operations } & \$ 110,000 \\\text { Interest income from saving account } & 5,000 \\\text { Long-term capital gain from sale of securities } & 9,000 \\\text { Short-term capital loss from sale of securities } & 4,000\end{array}$ ? Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty.As a result, Patty must recognize:

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2016, the date the S election is made. $\begin{array} { l r r } & \text { Adjusted Basis } & \text { Fair Market Value } \\\text { Cash } & \$ 200,000 & \$ 200,000 \\\text { Accounts receivable } & - 0 - & 105,000 \\\text { Equipment } & 110,000 & 100,000 \\\text { Land } & 1,800,000 & 2,500,000 \\\text { Accounts payable } & - 0 - & 110,000\end{array}$ ​ During the year, Alomar collects the accounts receivable and pays the accounts payable.The land is sold for $3 million, and the taxable income for the year is $590,000.Calculate any built-in gains tax.